The 7 percent bonds issued by modern kitchens pay interest semiannually, mature in eight years, and have a $1,000 face value. Currently, the bonds sell for $987. What is the yield to maturity?.

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15-11-2022
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The 7 percent bonds issued by modern kitchens pay interest semiannually, mature in eight years, and have a $1,000 face value. Currently, the bonds sell for $987. What is the yield to maturity?.

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contexto1005 contexto1005 · Answer 1 · 2022-11-17T15:44:09+01:00

The approx Yield to maturity is 7.20%

Either Excel or Financial Calculator must be used to determine a bond's exact YTM. Manual computations only allow us to arrive at an approximation of YTM.

Manual calculation: For this, a mathematical relationship is needed:

But remember. This will yield approximate YTM only

Approx YTM = \frac{35 + \frac{1000 - 987}{16}}{\frac{1000 + 987}{2}}

Approx YTM = 35.8125/994

Approx YTM = 3.60% ---> semi-annual

Annual approx YTM = 3.60% * 2 = 7.20%

Yield to maturity (YTM) is the total rate of return a bond will have achieved after all interest payments and principal repayments have been made. The internal rate of return (IRR) on a bond if held to maturity is essentially what YTM stands for.

Learn more about Yield to maturity visit https://brainly.com/question/26376004

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